The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. Which of the following statements is TRUE?
A) The firm is producing at minimum long-run average cost.
B) Over time, this firm will leave this industry.
C) The firm is earning positive economic profit.
D) The firm will eventually decrease its production.
A
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Assume the technology for producing personal computers improves and, at the same time, individuals discover new uses for personal computers so that there is greater utilization of personal computers. Which of the following will happen to equilibrium price and equilibrium quantity?
A) Price will increase; quantity cannot be determined. B) Price will decrease; quantity cannot be determined. C) Quantity will increase; price cannot be determined. D) Quantity will decrease; price cannot be determined.
In the new classical view, an anticipated decrease in government spending would be expected to
a. lower output and the price level. b. lower output but leave the price level unchanged. c. leave output unchanged and raise the price level. d. leave output unchanged and lower the price level. e. leave both output and the price level unchanged.
Suppose that in a market for used cars, there are good used cars and bad used cars (lemons). Consumers are willing to pay as much as $9,000 for a good used car but only $3,000 for a lemon. Sellers of good used cars value their cars at $7,500 each and
sellers of lemons value their cars at $1,500 each. Buyers cannot tell if a used car is reliable or is a lemon. Based on this information, what is the likely outcome in the market for used cars? A) Sellers of good used cars will drop out of the market. B) Sellers of good used cars will incur losses. C) Sellers of lemons will drop out of the market. D) Used cars will sell for $6,000.
Changes in a currency's exchange rate adjust immediately to insure that
A) official settlements account parity always prevails. B) net exports always equal zero. C) interest rate parity always prevails. D) current account balance equals zero. E) purchasing power parity always prevails.